How to Manage Debt and Credit Effectively

Having is not at all a bad thing as long as you know how to handle it. In today’s world, debt and credit can be considered as a part of life. In fact, applying for credit is highly recommended to build personal credit history. The question is, how can you manage debt and credit effectively?

In this article, let’s take a look at the different forms of debt that you may incur and what makes one different from the other. Next, we will discuss the pointers that borrowers should consider to avoid problems associated with debt and credit.

Instalment Debt or Loans

Loans come in various types, depending on the purpose it serves. For instance, you may get a car loan or auto loans if you want to purchase a vehicle. If you are planning to purchase a house, then you can apply for a mortgage loan or a housing loan. Meanwhile, personal loans can be acquired for different reasons such as for improving or renovating the house, paying college tuition, going to a grand vacation, paying medical bills, paying another creditor, and other expenses.

Regardless of what type of loan you need, this type of debt falls under instalment debt which means the borrower can acquire one large sum of money from a creditor and pay it back in monthly instalments within a given period of time. An interest is applied for each monthly payment. The repayment period may last anywhere from a few months to a few years. The length of repayment will of course depend on the amount of loan and the terms of the lender.

Revolving Credit or Lines of Credit

A revolving line of credit or a credit line comes in two categories: equity loan and credit card. An equity loan is type of loan which is secured by the borrower’s property. However, unlike a regular loan, the amount borrowed is not provided in one lump sum payment. Instead, the borrower is given the option to take out cash advances at any time within a specific period or until the equity or the maximum amount is reached.

On the other hand, a credit card provides its holder the opportunity to charge bills or purchases to the account as long as it is within the allowable limit. If the cardholder exceeds the credit line, he/she must pay the over-the-limit charge.

Charges are payable within a given period which can range from 25 days to 30 days The cardholder also has the option to pay the charges in full or pay only the monthly minimum due and carry over the balance for the next payment period. If the cardholder chooses to leave a balance, the interest rate will be applied to the charge.

Manage Debt and Credit Effectively

On Loans:

1. Choose a lender that offers reasonable terms of repayment.

2. Check the background and reputation of the lending company.

3. Choose a repayment period that suits your financial capability.

4. Play your repayment in advance.

5. To avoid getting rejected and to get the best offer, check your credit reports before submitting your loan application.

6. Choose a loan with a fixed rate of interest.

7. Read the Terms and Conditions of the loan.

On Credit Cards

1. Choose a credit card that serves your purpose.

2. Compare the interest rates and fees.

3. Read the fine print.

4. Pay off your monthly balance in full.

5. Submit your payments on time.

6. Stick within your credit limit.

7. Check your monthly credit card statement.

8. Avoid using your credit card on purchases you did not plan.

9. Before charging a purchase to your credit card, consider seriously if you can pay it on time.

10. Be sure to read all notices and mails sent by your credit card company as they may contain notifications about changes with the terms and conditions.


About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2011

Leave a Reply

Your email address will not be published. Required fields are marked *